Update: Expanded clothing sales tax among taxes, fees state lawmakers are considering to balance the budget

View full sizeMike Groll / APNew York Gov. David Paterson talks to reporters about the state budget at the Capitol in Albany on Wednesday. New York's leaders are turning to the sales tax and other taxes and fees to balance a budget that is nearly three months late.

ALBANY, N.Y. — New Yorkers would see an end to tax-free clothes and shoes under $110 as Albany searches for revenue to balance a state budget that’s nearly three months late.

The proposal was another dicey step in the fiscal crisis for lawmakers, all of whom face re-election this fall; a recent poll found that 8 in 10 New Yorkers are dissatisfied with state government.

Two state officials said the measure under discussion would expand the state’s 4 percent sales tax on clothing to purchases of footwear and clothing under $110, which are currently exempt. One of the officials said the proposal would eliminate that exemption in coming months through the end of the fiscal year, then restore it at a lower level Jan. 1. That level has not has not yet been determined, according to the official.

Additionally, the state would not offer any tax-free holidays for back-to-school shopping and other occasions that have accompanied past changes in the clothing tax. The officials spoke on the condition of anonymity because of the sensitivity of the talks.

Democratic Gov. David Paterson wouldn’t discuss details of revenue proposals. “They have some proposals on the table,” Paterson said after a closed-door meeting with Democratic legislative leaders. “Frankly, they don’t sound bad.”

Assembly Speaker Sheldon Silver would only say that a number of options were discussed.

Paterson said tax, fee and other increases are needed in part because New York may lose at least a portion of $1 billion it expected in Medicaid reimbursement from the federal government. Paterson had planned to use that money to help close the state’s $9.2 billion deficit.

Silver said he hopes to get a budget passed within days, before Paterson’s deadline of Monday to impose one.

Lawmakers would be forced then to accept Paterson’s budget provisions as part of an emergency spending bill or shut down government.

The budget so far includes raising the cigarette tax to the highest in the nation, $1.60 added to the current $2.75 per pack tax with New York City tacking on an additional $1.50 in local tax. In additon, Paterson’s proposal to cap all local property taxes — among the nation’s highest — appears unlikely at this point.

The revenue proposal surfaced as a Quinnipiac University poll released Thursday found a record 83 percent of New Yorkers are dissatistifed with their state government and half would vote their Assembly member and senator out of office this election year. “The resentment is bigger than we’ve ever measured,” said the poll’s executive director, Maurice Carroll.

That’s a concern for lawmakers, who have each already had more than $18,000 in salary withheld under law since April 1 budget deadline was missed.

Now they face a vote that will shape many of their election campaigns this fall. Allowing Paterson, who is not seeking election this year, to impose a budget might be better than being responsible for one that cuts school aid, lays off teachers, cuts other services and raises the cigarette tax. But being part of the first Legislature to allow him to do so might not be much better.

“It puts us in very troubled waters,” said Sen. Bill Perkins, a Manhattan Democrat. “For some, it may be a ’do or die.’ For some, it won’t be.”

The Legislature has so far approved Paterson’s emergency spending bills over the last three weeks, but those budget bills had general support by the Assembly and Senate. Monday’s emergency bill could include Paterson’s more controversial $1.4 billion cut in school aid as well as his plan to give the State University of New York more autonomy including the ability to set its own tuition. Rejecting Monday’s bill, would shut down government.

“Senate Republicans will not vote for any budget that includes new taxes, fees or borrowing,” said Senate Republican leader Dean Skelos of Nassau County. If that holds, the GOP would require all 32 Democrats in the Senate to vote for the budget bill if it is to pass.

A key Democratic senator, Pedro Espada Jr. of the Bronx, said an increase in the sales tax may not get support from him or his conference because it’s a regressive tax. “The governor has backed himself into a corner with a deadline, nobody else has accepted that deadline,” said Espada, the Democrats’ majority leader. “This end game, it’s a very dangerous game the governor is playing.”